Somebody, Hose it Down!

For two years Cowan had been agonising about how to improve the decision-making process. His recommendation to the Board in 2000 to employ an external consultant was intended to improve those relationships. Instead, the workshop would expose an issue that took the conflict to a new level.

In 1996, Cowan had negotiated a new contract with the Board Executive, which would take him to his planned retirement date of 2006. The same confidentiality over his remuneration arrangements that he had insisted on since 1965 was written into the contract. In 2000, that confidentiality would become another catalyst for conflict.

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Cowan contacted the company, and board and management agreed to hold an evening workshop, in May 2000, facilitated by John Kilmister. Cowan held high hopes that an independent consultant might help board and management work together more productively and harmoniously.

Kilmister made a number of recommendations that were designed to improve board/management relationships.¹

In the course of the workshop, somebody asked the consultant if he thought it was appropriate for senior management remuneration packages to be disclosed only to the executive of the board and the club’s auditors. The consultant’s opinion was that it would be preferable for the full board to have that information, but he added that there was nothing illegal about that sort of confidentiality.

Despite Bateman’s later evidence that he had been curious about Cowan’s remuneration since joining the Board, the issue had not previously been raised with Cowan in the boardroom.

In his first day of evidence at the inquiry, John Bateman told Ian Temby that he had been curious about the remuneration of the CEO from the time he first became a director, in December 1995. He cited his experience as a Penrith councillor as the reason for his interest. What is notable is that, despite that longstanding interest, he had apparently not previously raised the issue in the Panthers boardroom.

At the next board meeting², John Bateman asked Roger Cowan a seemingly simple question. The answer was straightforward. Its significance would not become fully apparent until some four years later.The question?

Does any manager employed by Panthers hold an interest in any company doing business with Panthers?

Although John Bateman maintains that he never asked such a question, Cowan says he has a vivid recollection. It seemed rather confrontational and was quite unexpected, which is why it stands out in his memory. He recalls the question very well because of his reaction to it.

My immediate thought was that he was asking a question when he knew the answer. I sensed that he was trying to lay a silly trap, thinking that I would try to fudge an answer. To me, this was crazy because there was no secret about Phyro Holdings. Everybody in the office knew about it, all the managers knew about it, and then there were all the external companies where we booked our advertising, etc – all through Phyro. I had no reason to think anyone would not know about it.³

I didn’t know that in the week leading up to the meeting, someone in Bateman’s office had carried out ASIC searches on Phyro Holdings. But I still believed he was up to something, and, given my immediate suspicions, can anybody imagine that I would have failed to answer the question?

I replied that the only one that I was aware of was Phyro Holdings.

The discussion became more and more heated as some directors demanded that the confidentiality clause in the contract be ignored in favour of full disclosure to the Board. But confidentiality was a condition of his contract, Cowan told them, and that same confidentiality covered all senior managers. It was quite legal, he told the meeting, and everything was subject to audit at any time by the board executive and the club auditors.

He also told them that his experiences over the previous two years made it clear that once the full board learned the details of his contract, Ron Mulock would have them by the next morning. And the whole of Penrith would be reading it by the end of the week in the Western Weekender.  From Cowan’s perspective, his experiences over the previous two years demonstrated that confidentiality could no longer be relied upon once information reached the full Board.

The friction in the meeting increased. Some directors were insisting that the confidentiality provisions be waived, and Cowan was telling them an agreement was binding and they had no right to change it.  After a final outburst, Cowan walked out, declaring he would not work for such dishonorable people.

In hindsight, Cowan says the words he used at the time were only slightly less stupid than his decision to walk out:

The day this board finds out the details of my remuneration I will leave the club

But in that moment, he says, he had decided enough was enough. How could he have respect for a Board dominated by directors demanding that a long standing contract be broken? He told Ian Temby that in doing what he did, he knew he was resigning.

When I nearly got back home, I thought this is a stupid thing I am doing, I’ve let a lot of people down, I am acting selfishly.  I drove back and went into the room, and nobody said anything.  When I walked back in, I fully expected them to say, “No way, you resigned.”⁴

Terrence Lynch is a barrister who has acted for Panthers on several occasions⁵. He says that Cowan’s rigid stance on the whole confidentiality issue was out of character.

It always surprised me that Roger wasn’t prepared to open up his salary and remuneration arrangements to the full board, particularly when it became such a contentious issue.

I was also surprised that he let it continue. Given my understanding of how he had run the place, I am amazed that he allowed it to become an issue. Why didn’t he just step aside and shut it down? I went to many meetings with various groups at the club, and my impression was that it was a very open and relaxed place, and there was no factionalism or camps. I never ever sensed any party lines there at any time.

This was the environment he’d created, so it’s even more surprising that he dug in. It is the one time that I have ever seen him let ego get in the way, though maybe ego’s not the right word.  But he was definitely acting more undisciplined than you would ever expect. It was a concentration on self rather than seeing the big picture – which he had always done for nearly forty years – and what he is known for.

Viewed dispassionately, the dispute was not simply about whether Cowan’s remuneration was excessive. Cowan maintained that his package was commensurate with the responsibilities of running a business approaching $300 million in annual turnover.

The argument had become one about disclosure, confidentiality and trust.

So, why didn’t somebody ever move to hose it down?

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1. The Kilmister process extended beyond the issue of executive remuneration discussed here. Ian Temby’s report records that on 6 June 2000 the Board accepted 21 of 24 policies arising from the Kilmister work. Three were deferred for further consideration, dealing with monitoring the CEO’s performance, financial performance benchmarks, and whether the CEO’s contract was appropriate to the position and consistent with industry and comparable-company benchmarks. ↩︎
2. This refers to the next Board meeting after the May 2000 session with John Kilmister. ↩︎
3. Temby’s later findings drew a distinction between knowledge that Phyro Holdings existed and was the Cowan family company, and knowledge of the extent of its financial dealings with Panthers. Evidence before the Inquiry indicated that some directors knew of Phyro but said they did not know the extent or nature of the transactions passing through it. ↩︎
4. Temby later summarised the outcome starkly: “In the result nothing was achieved.” The existing arrangement remained: Cowan’s remuneration was known to him and the Board Executive, as was Phyro’s involvement. ↩︎
5. Lynch, a prominent Sydney barrister, was junior counsel representating Panthers during the Temby Inquiry. It should be noted that in that role he was not representing Cowan, he was representing the Panthers Board and ex-members of the Board including the group that had been labelled “The Footy Five”. ↩︎

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